NEENA NARESH SINGHI, MUMBAI V. ASST CIT 24(3), MUMBAI

ITA 5141/MUM/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6288 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 03-08-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAVITA P KAUSHIK
• Keywords: Opportunity of being heard; Earning of tax free income; Rule 8D; Set aside
• Section: 54F; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B , MUMBAI BEFORE S HRI S. RIFAUR RAHMAN (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 5141/MUM/2017 ASSESSMENT Y EAR: 2010 - 2011 SMT. NEENA NARESH SINGHI, 37, APOLLO ENDOSCOPY CENTRE, HIRNEN SHOPPING CENTRE, S.V. ROAD, GOREGAON (WEST), MUMBAI - 400062 PAN: AAPPS1647G VS. THE ASST. COMMISSIONER OF INCOME TAX 31(2), MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI BHARAT SHAH ( AR ) REVENUE BY : MS. KAVITA P. KAUSHIK ( SR. D R ) DATE OF HEARING: 14 /11 /201 9 DATE OF PRONOUNCEMENT: 31 / 01/2020 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 31.05.2017 PASSED BY THE COMMISSIONER OF INCOME TAX (A PPEALS) - 42 (FOR SHORT THE CIT(A) , MUMBAI, WHICH PERTAINS TO ASSESSMENT YEAR 2010 - 11 , WHEREBY THE LD. CIT(A) HAS DISMISSED T HE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED U/S 143 (3) R.W.S 263 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). 2. IN THIS CASE, T HE ASSESSEE HAD FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010 - 11 ON 29.09.2010 DECLARING TOTAL INCOME OF RS. 50,83,105/ - . THE ASSESSMENT ORDER PASSED U/S 143 (3) OF THE ACT DETERMINING THE TOTAL INCOME AT RS . 1,76,85,080/ - . SUBSEQUENTLY, THE PR. CIT, MUMBAI EXERCISING POWERS U /S 263 OF THE ACT SET ASIDE THE ASSESSMENT ORDER ON THE GROUND THAT THE ASSESSEE HAD SHOWN INTEREST INCOME FROM FD BONDS SAVING ACCOUNT AND CLAIMED INTEREST EXPENSES. SINCE, THERE IS NO NEXUS WITH THE EARNING OF INTEREST, THE INTEREST 2 ITA NO. 5141 / MUM/2017 ASSESSMENT YEAR: 2010 - 1 1 EXPENDITURE AMOUNTING TO RS. 2,17,331/ - NEEDS TO BE DISALLOWED AND ADDED TO THE TOTAL INCOME. SECONDLY , THE ASSESSEE HAD SHOWN TAX FREE INCOME AMOUNTING TO RS. 1,62,503/ - , THEREFORE THE EXPENSES SHOULD BE DISALLOWED U/S 14 A R.W.R. 8D WHICH HAS NOT BEEN DONE BY THE AO. THIRDLY, IT WAS OBSERVED THAT THE ASSESSEE HAD MADE INVESTMENT IN NEW PROPERTY BEING FLAT NO. 202/302 THE EXEMPTION U/S 54F IS ALLOWABLE ONLY WITH REGARD TO ONE PROPERTY AND NOT TO THE PROPERTIES CLAIMED BY TH E ASSESSEE AND THE AO HAS NOT CONSIDERED THE SAME. ACCORDINGLY, T HE AO PASSED THE ORDER U/S 143 (3) R.W.S. 263 OF THE ACT DATED 26.03.2016 DISALLOWING THE CLAIM OF EXPENDITURE OF RS. 2,17,181/ - AND MAKING DISALLOW ANCE OF RS. 27,628/ - U/S 14A OF THE ACT. TH E ASSESSEE FURTHER CHALLENGED THE ASSESSMENT ORDER PASSED U/S 143 (3) R.W.S. 263 OF THE ACT BEFORE THE LD. CIT (A). THE LD. CIT (A) AFTER HEARING THE ASSESSEE DISMISSED THE APPEAL OF THE ASSESSEE. 3. INITIALLY, THE ASSESSEE CHALLENGED THE IMPUGNED ORDER O N SOME OTHER GROUND S . THEREAFTER, THE ASSESSEE FILED ADDITIONAL GROUNDS ON 15.11.2018 AND 04 . 06. 2019. 4. ON THE DATE OF HEARING, THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE WANTS TO CHALLENGE THE IMPUGNED ORDER ON THE ADDITIONAL GROUNDS SUBMITTED ON 04 .06.2019. THE ADDITIONAL GROUNDS SUBMITTED ON 04.06.2019 READ AS UNDER: 1. THE DISALLOWANCE OF INTEREST OF RS. 2,17,181/ - SHOULD BE DELETED BECAUSE : I. THE ASSESSEE HAS USED BORROWED FUNDS IN TAXABLE INTEREST EARNING ASSETS BOI SERVING PLUS SCHEME II THE ASSES SEE HAS USED ITS OWN SUFFICIENT FUNDS TO ADVANCE INTEREST FREE LOAN TO THE PARTY. 2. THE DISALLOWANCE OF EXPENSE OF RS. 27,628/ - SHOULD BE DELETED BECAUSE: I. THE ASSESSEES OWN FUND IS MUCH MORE THAN FUND INVESTED IN ASSETS WHICH GENERATE INCOME WHICH DOES N OT FORM PART OF TOTAL INCOME II THE ASSESSING OFFICER HAS NOT COME TO SATISFACTION THAT THERE IS SOME EXPENDITURE PERTAINING TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME. ASSESSING OFFICER HAS DIRECTLY APPLIED RULE 8D WITHOUT DETERMINING WHICH EXPE NDITURE HE 3 ITA NO. 5141 / MUM/2017 ASSESSMENT YEAR: 2010 - 1 1 FEELS IS PERTAINING TO INCOME WHICH FORM PART OF TOTAL INCOME AND HOW SUCH EXPENSES HE CANNOT DIRECTLY QUANTIFY AND SO, HE IS USING RULE 8D TO QUANTIFY DISALLOWANCE. 5. VIDE GROUND NO. 1 THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD. C IT(A) IN CONFIRMING THE ADDITION OF RS. 2,17,181/ - MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF INTEREST CLAIMED BY THE ASSESSEE. T HE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT THAT LD. CIT(A) HAS WRONGLY DISMISSED THIS GROUND OF APPEAL HOLDING THAT THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE REGARDING INVESTMENT IN BANK OF INDIA IN F IXED DEPOSIT AMOUNTING TO RS. 75,00, 000/ - FROM THE FUNDS OF RS. 32.80 LACS RECEIVED FROM NAR ESH M SINGH I, CONTRARY TO THE FACT THAT THE ASSESSEE HAS FURNISHED THE EN TIRE DETAILS BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS. THE LD. COUNSEL FURTHER SUBMITTED THAT THE ISSUE MAY BE SET ASIDE TO THE FILE OF AO FOR DECIDING THE SAME AFRESH AFTER PROPER VERIFICATION OF THE DETAILS FURNISHED BY THE ASSESSEE. 6. ON THE OT HER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTING THE ORDER PASSED BY THE LD. CIT (A) SUBMITTED THAT SINCE THE LD. CIT (A) HAS DECIDED THE ISSUE AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, THERE IS NO INFIRMITY IN T HE ORDER PASSED BY THE LD. CIT (A) TO SET ASIDE THE SAME TO THE FILE OF AO FOR FRESH ADJUDICATION. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PERUSED THE MATERIAL ON RECORD. AS POINTED OUT BY THE LD. COUNSEL, THE LD. CIT (A) HAS DISMISSED THIS GROUND OF APPEAL HOLDING THAT THE ASSESSEE DID NOT FURNISH ANY EVIDENCE TO PROVE THAT INTEREST BEARING FUNDS RECEIVED FROM SH. NARESH M. SINGHI WERE INVESTED IN FIXED DEPOSITS WITH BANK OF INDIA. PERUSAL OF THE COPY OF BALANCE SHEET PLACED ON RECORD BY THE ASSES SEE REVEALS THAT THE ASSESSEE APART FROM OTHER INVESTMENT MADE INVESTMENT IN SAVING PLUS SCHEME OF BANK OF INDIA AMOUNTING TO RS. 99,000/ - AND IN FD AMOUNTING TO RS. 75,00,000/ - . HOWEVER, W E NOTICE THAT THE AO HAS NOT DISCUSSED ABOUT THE INVESTMENT MADE IN FD AFORESAID. HENCE, IN OUR CONSIDERED VIEW, THE ISSUE NEEDS FRESH DETERMINATION BY THE AO AFTER VERIFICATION OF THE DETAILS IN THE LIGHT OF THE CONTENTION OF THE ASSESSEE. HENCE, WE SET ASIDE THE FINDINGS OF THE LD. CIT (A) AND SEND THE ISSUE 4 ITA NO. 5141 / MUM/2017 ASSESSMENT YEAR: 2010 - 1 1 BACK TO THE AO WITH THE DIRECTION TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE SUBMISSIONS MADE BEFORE US , AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . 8. VIDE GROUND NO. 2 THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD. CIT (A) IN CO NFIRMING THE DISALLOWANCE OF RS. 27,628/ - MADE BY THE AO U/S 14A R.W.R. 8D OF THE INCOME TAX RULES (RULES). THE LD. COUNSEL SUBMITTED BEFORE US THAT THE LD.CIT (A) HAS WRONGLY CONFIRMED THE DISALLOWANCE U/S 14A R.W.R. 8D MADE BY THE AO AS THE AO HAD NOT CO ME TO ANY SATISFACTION THAT THE EXPENDITURE PERTAIN TO THE INCOME WHICH DO ES NOT FORM PART OF THE TOTAL INCOME. THE LD. COUNSEL FURTHER POINTED OUT THAT THE ASSESSEES OWN FUND WERE MUCH MORE THAN THE INVESTMENTS MADE BY THE ASSESSEE FOR EARNING EXEMPT INC OME. THE LD. COUNSEL INVITED OUR ATTENTION TO THE BALANCE SHEET AS ON 31 ST MARCH 2010 AND POINTED OUT THAT THE ASSESSEES OWN CAPITAL AS ON 31 ST MARCH 2010 WAS 3,33,12,751/ - AGAINST THE TOTAL INVESTMENT OF RS. 1,49,78,300/ - . PLACING RELIANCE ON THE JUDGMEN T OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. HDFC BANK LTD. SUBMITTED THAT SINCE THE AO HAS DIRECTLY APPLIED RULE 8D WITHOUT RECORDING HIS DISSATISFACTION REGARDING THE CLAIM OF THE ASSESSEE . THE LD. COUNSEL FURTHER SUBMITTED THAT SINCE THE AO HAD DETERMINED THE DISALLOWANCE UNDER RULE 8D(2)(III) WITHOUT EXCLUDING THE INVESTMENTS WHICH DID NO T GENERATE EXEMPT INCOME, THE L D. CIT(A) OUGHT TO HAVE SET ASIDE THE FINDINGS OF AO. 9. ON THE OTHER HAND, THE LD. DR SU BMITTED THAT SINCE THE ASSESSEE HAS EAR NED EXEMPT INCOME AMOUNTING TO RS. 1,62,503/ - AND HAD NOT MADE ANY SUO MOTO DISALLOWANCE, THE LD. CIT (A) HAS RIGHTLY CONFIRMED THE DISALLOWANCE OF RS. 27,628/ - MADE U/S 14A R.W.R. 8D (2)(III) OF THE RULES. SINCE, THE DISALLOWANCE HAS BEEN MADE IN ACCORDAN CE WITH THE PROVISIONS OF LAW, THERE IS NO MERIT IN THE CONTENTION OF THE ASSESSEE. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE HAS CLAIMED THE EXEMPT INCOME AMOUNTING TO RS. 1,62,503/ - , HOWEVER DID NOT MAKE AN Y SUO MOTO DISALLOWANCE. THEREFORE, THERE IS NO MERIT IN THE CONTENTION OF THE ASSESSEE THAT THE LD. CIT (A) HAS WRONGLY 5 ITA NO. 5141 / MUM/2017 ASSESSMENT YEAR: 2010 - 1 1 CONFIRMED THE ADDITION MADE BY THE AO ON THE GROUND THAT THE AO HAS APPLIED SUB - SECTION 2 OF SECTION 14A OF THE ACT WITHOUT RECORDING H IS DISSATISFACTION ABOUT THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE AFTER HAVING REGARD TO THE ACCOUNTS . S INCE THE ASSESSEE HAD CLAIMED THE EXPENSES AMOUNTING TO RS. 1,62,503 / - , THE AO COMPUTED THE DISALLOWANCE UNDER RULE 8D (2)(III) OF THE RULES, HOWEVE R, RESTRICTED THE DISALLOWANCE TO THE EXPENSES CLAIMED BY THE ASSESSEE . THE LD. CIT (A) HAS CONFIRMED THE SAME HOLDING THAT DISALLOWANCE AS PER RULE 8D(2)(III) IS MANDATORY. SO FAR AS THE CONTENTION OF THE ASSESSEE THAT THE ASSESSEE HAS SUFFICIENT OWN FUND S FOR MAKING INVESTMENTS IN QUESTION IS CONCERNED, THE AO HAS NOT MADE ANY DISALLOWANCE UNDER RULE 8D (2) (I) AND 8D(2) (II) OF THE RULES. 11. IN SO FAR AS THE DISALLOWANCE UNDER RULE 8D (2) (III) IS CONCERNED, A S PER THE SETTLED LAW, THE AVERAGE VALUE OF ONLY THOSE INVESTMENTS ARE TAKEN INTO CONSIDERATION, FOR THE PURPOSES OF COMPUTING DISALLOWANCE UNDER RULE 8D(2)(III) , WHICH GENERATED EXEMPT INCOME DURING THE PREVIOUS YEAR. HOWEVER, IN THE PRESENT CASE, THE AO HAS TAKEN INTO CONSIDERATION THE AVERAGE VA LUE OF THE TOTAL INVESTMENTS MADE BY THE ASSESSEE. HENCE, IN OUR CONSIDERED VIEW, THIS ISSUE REQUIRES FRESH DETERMINATION IN ACCORDANCE WITH LAW . WE THEREFORE , SET ASIDE THE FINDINGS OF THE LD. CIT (A) AND SEND THE ISSUE BACK TO THE AO WITH THE DIRECTION TO RE - COMPUTE THE DISALLOWANCE UNDER RULE 8D(2) (III) IN ACCORDANCE WITH LAW AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2010 - 2011 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY , 2020 . SD/ - SD/ - ( S. RIFAUR RAHMAN ) ( RAM LAL NEGI ) ACCOUNTANT MEMB ER JUDICIAL MEMBER MUMBAI ; DATED: 31 / 01/2020 ALINDRA, PS 6 ITA NO. 5141 / MUM/2017 ASSESSMENT YEAR: 2010 - 1 1 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI